Millions of US homeowners took advantage of generous breaks that allowed borrowers to skip mortgage payments without penalty.
But if you’ve been forborne and now want to refinance, be sure to follow a few simple rules, says Richard Pisnoy, director of Silver Fin Capital Group. To be eligible for a Forbearance Refi, you must have made three consecutive payments on your loan and you must formally ask your mortgage agent for a Forbearance Release.
Pisnoy spoke with Bankrate about what he sees in the mortgage market.
What’s the biggest mistake borrowers make?
Pisnoy: Not being honest and frank with the loan officer. What tends to happen is that borrowers may not know the information they are supposed to be getting. If you have been forborne, there are rules associated with refinancing. To get out of forbearance, you must make three months of consecutive payments before you can take out a new loan. These things can come into play and be very problematic.
How often do abstention issues delay a refi?
Pisnoy: In the last six months, a lot has happened. If the borrower has only made a few payments, we suspend the loan until they have made the third payment. Payment must be made in a timely manner – you cannot make the June payment on June 30. Once you’ve made the third payment on time, you can proceed with refinancing. But as the borrower, you must contact the lender and end the forbearance. Another mistake is not getting pre-approved – not just a letter, but having your assets reviewed, your income reviewed.
How can homebuyers navigate this rapidly appreciating market?
Pisnoy: It’s crazy. We are in a hot sellers market. The inventory is low. Salespeople are picky. Real estate agents are picky. People think their down payment is all they need to find. But there are closing costs. There is escrow. In some cases, the buyer must reimburse the seller for prepaid property taxes. Often, buyers don’t realize that the escrow account needs to be funded at closing. The buyer may come to the table and find they have to shell out an additional $ 5,000 for property taxes or insurance.
You are not satisfied with the new uniform home loan application used by Fannie Mae and Freddie Mac.
Pisnoy: We are in three months and it is very confusing. It went from four pages to 12 pages. On the old Uniform Home Loan Application, or URLA, your current payment is on the left, your new payment is on the right. Very simple, very easy to compare. The new URLA does not do this. It does not tell you your new payment. It doesn’t give you a side-by-side comparison. How does this make sense? If you refinance the rate and the term, it’s one thing if the loan officer says you’re saving $ 200, $ 300, $ 400 a month. It is another thing to show it. The new URLA doesn’t change the qualifying dynamics, but it just takes longer.
Are Self-Employed Borrowers Still Having Difficulty Qualifying For Mortgages?
Pisnoy: Lenders put new rules in place during the pandemic. Some of those overlays for freelance borrowers are going to go away, so that’s pretty good. But independent borrowers still need more work to underwrite. In a sense, this is discrimination against the independent borrower. We try to prepare the borrowers. Prepare your business bank statements. Prepare your K-1 statements, if you have them. Make sure your bank statements match your profit and loss. We don’t want a lender to say, “Your bank statements only show $ 10,000, but your income statement shows $ 100,000. “